Combatting the financing of terrorism: time for results

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Turkey, Egypt, Lebanon, France, Mali, Nigeria. Tunisia. To go back further in time – Kenya, Somalia, Tunisia, Cameroon. In no way a comprehensive list.

Paris is my home. I have also visited many countries affected by terrorist acts. Global terrorism hits home for me, and affects so many friends and colleagues. I mourn all these casualties, all this shocking horror.

They also hit home because my work over the last 15 years has focused on combatting the financing of terrorism (CFT). I have been wondering a lot over the last months – is the counter terrorism financing community delivering? 


The global efforts against terrorism financing pre-date 9/11, with the 1999 United Nations Convention for the suppression of the financing of terrorism, a universal instrument. Since then, the UN Security Council and the Financial Action Task Force (FATF – the international standard setter on countering terrorism financing) and its regional network, have been at the forefront of international efforts against the financing of terrorism. Counter-terrorism financing is unfortunately sometimes perceived as a Western agenda. It is indeed frustrating when renewed calls for action seem to occur when a Western country is hit. But terrorism affects all of us, especially developing countries. The newly released Global Terrorism Index 2015, prepared by the Institute for Economics and Peace (IEP), makes for a stark reading:

  • “Terrorist activity increased by 80 percent in 2014 to its highest recorded level. The largest ever year-on-year increase in deaths from terrorism was recorded in 2014, rising from 18,111 in 2013 to 32,685 in 2014. The number of people who have died from terrorist activity has increased nine-fold since the year 2000.”
  •  “Boko Haram overtakes ISIL to become the most deadly terrorist group in the world.” 
  • “Mirroring the broader increase in terrorism, the economic costs of terrorist activity have also dramatically increased. IEP conservatively estimates the economic cost of terrorism reached its highest ever level in 2014 at US$52.9 billion. This is a 61 percent increase from the previous year and a ten-fold increase since 2000.”
What have we – the global community – achieved in combatting terrorism financing? A lot has been achieved, but not enough yet – for sure.

To give a more thoughtful answer, one needs to step back and articulate the core objectives of the fight against financing terrorism. Any proposed action must be grounded in facts, respect for human rights and the rule of law to protect citizens and keep our societies open. A tough balancing act indeed.

Countering the financing of terrorism will not stop terrorism in itself. It can only work if coupled with broader efforts to address terrorism - e.g. political, military, social, developmental, and cultural – and if its contribution in these broader efforts is clearly spelled out.

We know CFT alone will not prevent terrorist acts, or stop every transaction with a possible link to terrorism. The two strategic goals of CFT are to contribute to the broader fight against terrorism by providing financial intelligence and to disrupt and dismantle the financing infrastructure of terrorism, without unduly hampering access to finance or the functioning of the global financial system. The focus should be on the forest, and not the trees.

To achieve these goals, the international community needs to:
  • Generate financial intelligence 
  • Add to intelligence analysis on terrorist networks 
  • Provide intelligence on terrorist financiers
  • Prosecute those who provide financial support to terrorism 

Over the last year, we have seen a renewed political momentum to fight terrorism financing, as the G20 did last week in Antalya. This is welcome, but what does this mean in practice?

Creating a collective, inclusive, and broad political commitment to achieve these goals is central. Most countries in the world now have the tools (laws, regulations, institutions) in place – as highlighted by a recent report from the FATF to the G20, covering more than 190 jurisdictions. Based on these achievements, this renewed political commitment now needs to be turned into action and well integrated into the counter-terrorism strategy.

We will soon see public calls for FATF and its regional networks to take the lead and renew their efforts. FATF, with the relevant international bodies, notably the UN and the Egmont Group (which brings together more than 150 Financial Intelligence Units from across the globe), should:
  • Better understand the terrorism financing threats by bringing together more than 170 jurisdictions in its network to share operational information. Such deeper understanding of the threats is critical to set operational objectives. This would also provide the platform for risk-based action – with systematic, sustained, and agile implementation. We are just beginning to better understand the finances of ISIS, as evidenced by FATF’s recent report on terrorism financing – but much more needs to be analyzed. We know very little about the financial infrastructure of Boko Haram, for instance. The financing of each significant terrorist organization needs to be understood in its own terms, to identify the most effective operational response – which may be different for ISIS, Al Qaeda, or Boko Haram.
  • Identify the key terrorism financing priorities and targets, to mitigate these most pressing threats, with clear expected results. This is not about changing the standard, or naming and shaming countries for their legal framework. It is about spurring action, putting the emphasis on international cooperation, and exchange of financial intelligence and evidence.  Based on these key priorities, FATF should then report on collective and individual results, focusing on the financial infrastructure of the critical terrorist organizations and using indicators such as: the systematic recourse to “follow the money” in every terrorism investigation; the exchange of information (financial intelligence, law enforcement, mutual legal assistance) relevant to these priorities; the assets of these organizations frozen, seized or confiscated; the terrorism financing infrastructures disrupted; and the terrorist financiers prosecuted and convicted.
  • Identify the most critical capacity gaps to implement such a collective endeavor, and engage partners, such as the World Bank, who can provide technical assistance to address these gaps.
The impact of terrorism doesn’t stop when the shock and horror begins to subside and people return to their daily routine. It has far-reaching consequences that impede economic activity and development – and the international community needs to focus on how best to achieve lasting results.

Authors

Jean Pesme

Practice Manager, Finance & Markets Global Practice, World Bank Group

Join the Conversation

Joanne
December 15, 2015

One of the reasons financial crime persists is that bankers are not law enforcement. Many are setting up new departments in the wake of the USA Patriot Act and recent developments. But these controls are not enough. The fact is, bankers are trained in finance, not law enforcement and many banking associates are not trained enough in recognition of suspicious activities. Often what activity that does get reported is ineffective and managers are complacent and resistant to change. We are treating the symptoms but not curing the disease by doing this. Attitudes need to shift in the financial services sector before real change will occur.